Monday, May 17, 2010

Because we've been answering questions about the IA TAG Pensions (and remember we've got three of them: the Defined Benefit Plan, the Individual Account Plan, and the TAG 401(k) Plan*), and because the question: "What do I get after fifteen years?" has been asked, let's do a little mind exercise.

(We're assuming here that you A) work fifty weeks a year for fifteen years, and B) the current structures and percentages of the DFP, the IAP and the 401(k) Plan remain in place.)

In the Defined Benefit Plan, working 2000 credited hours for ten years at the benefit rate of $ 0.0295 per hour, and then working an additional five years at the increased accrual rate of $0.0393 with the same number of credited hours (2000), you would end the decade and a half with a monthly annuity of $983.00 .

In the Individual Account Plan, it gets a tad trickier, because we have to make assumptions that may be low or could be high. But for our mind exercise, we assume the following: A $1600/week minimum contract rate, a 5% annual investment return (which leans conservative), and a 2% annual minimum wage increase (in line with most current bump-ups). We further assume that the employer contribution into the IAP of 6% of an employee's minimum rate (plus 30.4 cents for each hour worked) will be the same over the next decade and a half.

So. Plugging in all those percentages and numbers, and doing the calculations, we start with $5,420 the first year, and end with $136,199.19 at the end of year fifteen.

Not too shabby. (And please note that these two plans are automatic ... and paid for by contributions from the employer.)

Now, the third leg of the TAG Pension Suite, the optional TAG 401(k) Plan, is a no-match Plan (similar to 30% of the 401(k) Plans in the U.S. of A.), funded by employees' deducted, pre-tax wages.

For the 401(k) calculations, we assume a $16,500 annual employee contribution and a 5% rate of return, compounded. Plugging in those numbers, we get: $16,500 at the end of the first year, and $353,009.00 at the end of the fifteenth. ($247,000 of which would have been put in by the employee.)

Your grand total of pension benefits after fifteen years of creative labor? A $983 monthly annuity and $489,208.19 lump-sum accumulation.

I'm 38 and I have about 8 years in the union, which puts me at a little over half way to the 15-year mark. Based on the statement I got from the MPIPHP statement I got earlier this month, my Defined Benefit Plan is right on track for the numbers that Steve mentions above.

My IAP took a hit from 2008, as did everyone else. So, I'm not at the halfway mark there. But it's $33,000 of money that I didn't have working in non-union shops. Also, due to compounding interest, the money will grow faster in the later years as opposed to the beginning or middle. So I still might be able hit six figures in the IAP.

My 401(k) is only about a third of what Steve mentioned above after being in the union for 15 years. So I'm a little behind there. That's totally on me for not maxing out every year, but I made sure I put something in it when ever I work at a union shop. Plus, I've put money away elsewhere, so I guess if that money was in the 401(k) instead, I'd be on track there too.

On top of these financial benefits, if I can make it to 15 years, I get lifetime health insurance when I retire.

So, will I get those numbers that Steve mentions above? Maybe less, maybe more. But I'm sure that if I didn't have these benefits, I would have to work much harder to accumulate the same amount.

On a side note, I had a 7 month hiatus between union animation gigs. In that gap, the only job I could find paid only half of what I'm making now. There were no paid sick days, no paid holidays, no paid vacation, no 401(k) plan and no health benefits. (Maybe I should have looked harder for a better job? haha) Thankfully I had banked hours in the union so it bridged my health insurance until I got back to a union shop.

A lot of people here rag on the union, which is their right and opinion. But I'm glad to have access to these benefits. As Steve mentioned above, "Could be worse." :-)

Yes, there's a difference with any number of years you choose. With the above numbers (2000 hours a year, maxing out the 401(k) at current limits), after 20 years one would have a Defined Benefit monthly annuity of $1376, an Individual Account total of just over $200,000, and a 401(k) of around $565,000.

After 30 years, it would be a monthly annuity of $2,162, an IAP of slightly over $400,000, and a 401(k) with 1.144 million.

The more hours and years you work, the more you have coming at retirement.